The English language commentary is available, with German language available at a later stage

Extreme events like the current coronavirus crisis can push companies and consumers to embrace change faster than might normally be the case. Broadly speaking, this should support the powerful secular trends in which we tend to invest. We do not know how long the current crisis will persist, but we will remain opportunistic and firmly focused on the ideas that we believe have the potential to create significant value when we eventually emerge from the crisis.

The English language commentary is available, with German language available at a later stage

Global technology shares outperformed the MSCI All Country World Index in April. Within the portfolio, stock selection in software added value. Shopify provides an online commerce platform for small to mid-size businesses. The stock surged after selling off sharply in March, as investors came around to the view that the increase in e-commerce and the urgent need for many businesses to establish an online presence quickly could help to offset some of the headwinds stemming from the coronavirus pandemic. Our overweight allocation to internet also contributed. Shares of Amazon.com rallied in April, driven by news stories highlighting the coronavirus-driven surge in demand for essential products. At the end of the month, the company reported strong growth in its first-quarter retail revenue, though heavy investments in its fulfilment and delivery operations weighed on operating profits. Conversely, stock selection and an overweight position in financial services held back relative performance. None of the portfolio’s holdings in this subsector had a meaningful negative impact.

The English language commentary is available, with German language available at a later stage

We used the broad-based sell-off in equities to lean into investment ideas that we believe offer compelling risk/reward profiles, with an emphasis on names that should survive the coronavirus pandemic and associated economic contraction and emerge in an even better competitive position for the long term. These moves involved leaning opportunistically into investments that we believe could benefit from an acceleration in key secular trends and buying high-quality names that the market had punished because their underlying businesses face significant near-term risks.

Software

We continue to regard the business models and growth runways available in cloud-based enterprise software as some of the most compelling over the long term. Broadly speaking, we leaned into investment ideas where we see the potential for existing secular trends to accelerate while paring names that could face sales disruptions in the near term.

We initiated a position in Avalara, a company that specializes in cloud-based software that calculates customers' sales tax obligations across U.S. states and counties as well as international markets. We believe that, as a leader in its field, Avalara should benefit from continued growth in e-commerce.

We added to Shopify, which provides an online commerce platform for small to mid-size businesses. In our view, Shopify stands to benefit from the secular transition to e-commerce, a long-term trend that behavioral shifts stemming from the coronavirus outbreak could accelerate. We recognize that the company could face challenges as some of its customers face existential threats from supply-side disruptions and reduced demand. Regardless of the potential for near-term pain, we believe that a vibrant ecosystem of small to mid-size businesses should remain an important part of the economy on the other side of this crisis and that these operations increasingly will want to sell their goods and services online.

We trimmed ServiceNow and Salesforce.com, with the bulk of these sales occurring prior to the sharp sell-off in equity markets. Although we acknowledge that both companies could experience near-term sales disruptions because of the coronavirus outbreak, we expect their cloud-based platforms to benefit over the long term as enterprises accelerate their digital transformations to enhance business continuity and competitiveness.

Internet

Our internet holdings focus on platform companies that we believe have significant competitive advantages and compelling long-term growth prospects. Although we reduced the portfolio's overall exposure to internet stocks, we took advantage of broad-based weakness to increase our number of holdings in this subsector.

We pared Tencent Holdings and Alibaba Group Holding, the dominant e-commerce player in China. Nevertheless, we remain confident in these internet giants' long-term growth stories, as their core businesses benefit from powerful secular trends and they continue to leverage their popular platforms' network effects to pursue adjacent opportunities.

We trimmed Facebook. We acknowledge that coronavirus-driven macroeconomic weakness is likely to weigh on near-term demand for Facebook's online advertising solutions, especially among small to mid-size businesses. Nevertheless, we expect the economic downturn to strengthen Facebook's competitive position relative to traditional advertising outlets and believe our investment thesis remains intact. We continue to monitor regulatory developments and recognize that news on this front could increase volatility in Facebook's stock.

We initiated a position in Trip.com (formerly Ctrip.com International), China's dominant online provider of travel services. The stock sold off sharply, as the coronavirus outbreak in China and other countries depressed demand for domestic and international travel. Near-term challenges aside, we value Trip.com's potential to compound free cash flow over the long haul as demand for travel grows with household incomes in China.

Semiconductors

We refined the portfolio's semiconductor positioning. We recognize that semiconductor companies' financial results likely will take a hit from demand uncertainty and supply chain disruptions in the near term. At the same time, low inventories after last year's downcycle suggest that key segments of this subsector should benefit when economy activity eventually recovers. Over the long term, we believe the secular trend of increasing demand for advanced chips in data centers, artificial intelligence, automobiles, and industrial end markets remains intact.

We exited Texas Instruments, a leader in analog semiconductors, and Marvell Technology, a digital semiconductor company that specializes in storage controllers, ethernet switches, and enterprise connectivity.

We started a position in Infineon Technologies, a global leader in power semiconductors. Although the company's financial results should take a hit in the near term from severe weakness and disruptions in the automotive end market, we expect the company to benefit over the long term from several tailwinds, including growing adoption of renewable energy, the increasing electrification of vehicle subsystems, and the ever-expanding internet of things.

We added to Applied Materials, a leading supplier of semiconductor capital equipment. In our view, Applied Materials should benefit over the long term as customers step up spending to meet demand for memory chips and drive innovation in logic chips. We believe the market does not appreciate the company's growth prospects once the recovery cycle takes hold in key semiconductor markets.

Financial Services

We increased the portfolio's position in this subsector opportunistically, focusing on names that offer exposure to growth in online and mobile payments as e-commerce continues to take share. Near-term uncertainties aside, we believe that the lasting behavioral shifts driven by the health crisis could accelerate the uptake of electronic payments and online shopping.

We added to Visa and MasterCard. We like the companies' leverage to the transition away from cash to electronic payments as e-commerce continues to grow. We also value the business models' pricing power and capacity to generate free cash flow.

We initiated a position in Adyen, a European company that boasts an experienced management team and has developed, in house, what we regard as one of the best payment processing platforms available. An appealing fee structure and superior technology that results in fewer rejections and real-time access to sales data should enable the company to take market share while benefiting from secular shifts toward digital payments and mobile e-commerce.

The English language commentary is available, with German language available at a later stage

We increased our exposure to semiconductors opportunistically, focusing on memory chipmakers and companies that provide capital equipment to the subsector. Low inventories after last year’s downcycle suggest that key segments of this subsector should benefit when economic activity eventually recovers. On the capital equipment side, we believe that the market does not appreciate these companies’ growth prospects as customers step up spending to meet growing memory demand and drive innovation in logic chips. We reduced the portfolio’s exposure to software somewhat, although this subsector remained its largest weighting on an absolute basis.

The English language commentary is available, with German language available at a later stage

We initiated a position in Avalara, a company that specializes in cloud-based software that calculates customers' sales tax obligations across U.S. states and counties as well as international markets. We believe that, as a leader in its field, Avalara should benefit from continued growth in e-commerce.

We added to Shopify, which provides an online commerce platform for small to mid-size businesses. In our view, Shopify stands to benefit from the secular transition to e-commerce, a long-term trend that behavioral shifts stemming from the coronavirus outbreak could accelerate. We recognize that the company could face challenges as some of its customers face existential threats from supply-side disruptions and reduced demand. Regardless of the potential for near-term pain, we believe that a vibrant ecosystem of small to mid-size businesses should remain an important part of the economy on the other side of this crisis and that these operations increasingly will want to sell their goods and services online.

We trimmed ServiceNow and Salesforce.com, with the bulk of these sales occurring prior to the sharp sell-off in equity markets. Although we acknowledge that both companies could experience near-term sales disruptions because of the coronavirus outbreak, we expect their cloud-based platforms to benefit over the long term as enterprises accelerate their digital transformations to enhance business continuity and competitiveness.

We pared Tencent Holdings and Alibaba Group Holding, the dominant e-commerce player in China. Nevertheless, we remain confident in these internet giants' long-term growth stories, as their core businesses benefit from powerful secular trends and they continue to leverage their popular platforms' network effects to pursue adjacent opportunities.

We trimmed Facebook. We acknowledge that coronavirus-driven macroeconomic weakness is likely to weigh on near-term demand for Facebook's online advertising solutions, especially among small to mid-size businesses. Nevertheless, we expect the economic downturn to strengthen Facebook's competitive position relative to traditional advertising outlets and believe our investment thesis remains intact. We continue to monitor regulatory developments and recognize that news on this front could increase volatility in Facebook's stock.

We initiated a position in Trip.com (formerly Ctrip.com International), China's dominant online provider of travel services. The stock sold off sharply, as the coronavirus outbreak in China and other countries depressed demand for domestic and international travel. Near-term challenges aside, we value Trip.com's potential to compound free cash flow over the long haul as demand for travel grows with household incomes in China.

We exited Texas Instruments, a leader in analog semiconductors, and Marvell Technology, a digital semiconductor company that specializes in storage controllers, ethernet switches, and enterprise connectivity.

We started a position in Infineon Technologies, a global leader in power semiconductors. Although the company's financial results should take a hit in the near term from severe weakness and disruptions in the automotive end market, we expect the company to benefit over the long term from several tailwinds, including growing adoption of renewable energy, the increasing electrification of vehicle subsystems, and the ever-expanding internet of things.

We added to Applied Materials, a leading supplier of semiconductor capital equipment. In our view, Applied Materials should benefit over the long term as customers step up spending to meet demand for memory chips and drive innovation in logic chips. We believe the market does not appreciate the company's growth prospects once the recovery cycle takes hold in key semiconductor markets.

We added to Visa and MasterCard. We like the companies' leverage to the transition away from cash to electronic payments as e-commerce continues to grow. We also value the business models' pricing power and capacity to generate free cash flow.

We initiated a position in Adyen, a European company that boasts an experienced management team and has developed, in house, what we regard as one of the best payment processing platforms available. An appealing fee structure and superior technology that results in fewer rejections and real-time access to sales data should enable the company to take market share while benefiting from secular shifts toward digital payments and mobile e-commerce.

The English language commentary is available, with German language available at a later stage

Shares of Netflix, the global leader in streaming video on demand, gained ground in a challenging market. The company reported quarterly net subscriber additions that beat its guidance by a wide margin, fueled by strength in international markets. However, the stock's March recovery rally likely reflected the market's view that sign-ups for the service could increase as the coronavirus outbreak forces people to stay at home and forgo other discretionary expenditures. We believe the size of Netflix's content library and extensive lineup of forthcoming releases should enhance the service's value proposition in the near term. Over the long term, we value Netflix's leverage to the secular shift in how consumers view video programming and its opportunity to grow its international subscriber base. In our view, the market does not fully appreciate Netflix's scale advantage and its ability to leverage its content on a global basis.

Amazon.com's shares posted a modest gain, supported by the market's view that the company would benefit from efforts to control the coronavirus outbreak through social distancing. We believe the�scale and strength of the company's retail and public cloud businesses, coupled with its strong balance sheet and forward-looking management team, give the tech giant the necessary resources to drive innovation and disruption. These core businesses offer leverage to powerful secular growth trends that could accelerate as customers become more comfortable relying on Amazon.com's retail site for a wider range of products and enterprises embrace the cloud for business continuity and efficiencies. We continue to monitor regulatory developments as part of our holistic assessment of the stock's risk/reward profile. We added to Amazon.com.

Shares of Tencent Holdings gained ground, lifted by expectations that the coronavirus outbreak could drive a spike in mobile gaming and consumption of online content as more people stay home. We believe Tencent Holdings is one of China's best-positioned mobile internet companies and that its popular social and gaming platforms have significant potential for further monetization. We also appreciate the optionality embedded in Tencent Holdings' ancillary business lines, including online payments, internet finance, and cloud services.

Zoom Video Communications is a rapidly growing software-as-a-service company that specializes in video-conferencing solutions. The stock soared on expectations that adoption and usage of the product would surge as the pandemic prompts people to turn to video conferencing as an alternative to face-to-face interactions. We believe that the company's superior product should drive impressive top-line growth. We also appreciate its self-service distribution model, which helps to control marketing expenses and shorten the sales cycle.

We took advantage of weakness to start a position in Crowdstrike Holdings. The company has developed a cloud-based security platform that collects and analyzes massive amounts of data to rapidly identify and respond to potential attacks. Crowdstrike's share price surged after the company announced quarterly billings and revenue growth that topped the consensus estimates by a wide margin. We believe Crowdstrike's strength in end-point security should position its solutions to take share as the rise in remote work increases the number of vulnerable devices outside an enterprise's protective firewall.

Atlassian is a leading provider of collaboration software for enterprises. Its solutions have built a strong foothold among application developers. The stock gained ground, likely reflecting the appeal of the company's low-touch, self-service sales model and perceived leverage to an increase in remote work. We see the potential for Atlassian to compound value as software and application developers become increasingly important at enterprises of all sizes. The company's growth runway could also extend as its collaboration and project management tools gain traction outside information technology (IT) departments. We added to Atlassian.

Shares of NXP Semiconductors, which generates a significant portion of its revenue from the automotive end market, sold off on coronavirus-driven supply chain disruptions and weak demand for new vehicles. We believe that, over a longer time frame, the analog semiconductor company should benefit from its strong leverage to secular content gains in automobiles and the internet of things. We also like NXP Semiconductors' high operating margins (in a normal environment) and the visibility created by key design wins in the automotive segment, where product cycles tend to be longer. In our view, the company should have a strong enough balance sheet to survive the crisis and emerge stronger on the other side.

Shares of Microchip Technology, a high-quality supplier of analog chips and microcontroller units, sold off after weak demand and supply chain disruptions in Asia prompted management to lower its revenue guidance for its current quarter and withdraw its earnings outlook. The market's expectation that the coronavirus' spread in the U.S. and Europe would sap demand further also weighed on the stock, along with concerns about the company's leverage after its 2018 acquisition of Microsemi. We exited Microchip Technology.

In our view, Magazine Luiza boasts one of the leading e-commerce platforms in Brazil and Latin America, thanks to its digital prowess and the cost advantages and superior service that come from leveraging its existing store footprint. We like the company's leverage to the secular shift toward online retail and the potential to broaden its product selection, expand its user base, and increase transaction frequency by attracting brands and third-party sellers to its platform. Over time, we believe digital payments and financial services could emerge as additional growth drivers for the company.